How the House & Senate Budgets Impact Real Estate

Protecting your Business AND Increasing Funding for Education: We Can Do Both

A thriving environment for small businesses AND stronger, well-funded schools across our state...That was Washington REALTORS®’ ambitious goal as this legislative session began. While nothing can be certain as we enter special session, we are remarkably close to achieving that goal. Both the Senate and House budget proposals include historic increases in education funding for the third consecutive budget cycle. No matter what final budget deal is struck this year, school funding will have received no less than $6.2 Billion in new money over the last 5 years. Despite what you may have heard, the current Senate and House bills are comparable regarding additional money for K12 education. The Senate proposal doesn’t shortchange education by any means; it just focuses on education as a priority by calling for 95% of the House plan’s education but with half the new revenue. Both budgets would propel Washington into the Top 10 states for education funding, something we can all be proud of.

Here are the basic differences between the two proposals:

THE SENATE BUDGET

The Senate budget increases the state property tax, but offsets that by a decrease in local property tax. This complies with the Supreme Court’s directive in the McCleary decision to reduce reliance on local funding sources for basic education. While some high value property areas would see a slight increase in property taxes, 87% of all Washington homeowners would see no change or even a small decrease in property tax. We think this is the best, most stable way to fund education. Property tax is a stable source of funding, which may help explain why the state constitution itself identifies property tax as the main funding source for education. We think this plan makes the most sense.

THE HOUSE BUDGET

The House budget increases the B&O Tax our brokers pay by 20%, and also increases Real Estate Excise Tax (REET) on high value properties, farm land and commercial buildings ($1 Million and more). This is an $800 million tax increase on real estate transactions over the next 4 years. In addition to the REET increase the House plan also creates a legally questionable “State Capital Gains Income Tax” that is framed as a tax on stocks and investments, but that also applies to gains from sales of commercial properties, small businesses, and some investment real estate. We oppose new or increased taxes on real estate transactions – these types of revenues are far more volatile than property taxes, and Washington already taxes real estate transfers at one of the highest rates in the country.

Washington REALTORS® continues to believe that the Senate approach best supports our schools, while promoting a healthier environment for small businesses to succeed. In response to some legitimate concerns about a few of the Senate budget’s cuts, WR has identified almost $1 Billion in new tax revenue that we either support or are neutral on. For example, we support extending sales tax to online purchases, which has been a priority for our commercial practitioners for the last 5 years. This would bring a level playing field to brick and mortar stores and is a common sense tax fairness measure that also helps our schools.

We continue to believe that we can protect your business, and have world class schools in Washington. We are close to achieving both.